[Federal Register Volume 86, Number 135 (Monday, July 19, 2021)]
[Notices]
[Pages 38067-38071]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15217]


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DEPARTMENT OF EDUCATION


Federal Need Analysis Methodology for the 2022-23 Award Year--
Federal Pell Grant, Federal Work-Study, Federal Supplemental 
Educational Opportunity Grant, William D. Ford Federal Direct Loan, 
Iraq and Afghanistan Service Grant, and TEACH Grant Programs

AGENCY: Federal Student Aid, U.S. Department of Education.

ACTION: Notice.

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SUMMARY: The Secretary announces the annual updates to the tables used 
in the statutory Federal Need Analysis Methodology that determines a 
student's expected family contribution (EFC) for award year (AY) 2022-
23 for student financial aid programs, Assistance Listing Numbers 
84.063, 84.033, 84.007, 84.268, 84.408, and 84.379. The intent of this 
notice is to alert the financial aid community and the broader public 
to these required annual updates used in the determination of student 
aid eligibility.

FOR FURTHER INFORMATION CONTACT: Kerri Moseley-Hobbs, U.S. Department 
of Education, Union Center Plaza, 830 First Street NE, Washington, DC 
20202-5454. Telephone: (202) 377-3291.
    If you use a telecommunications device for the deaf (TDD) or a text 
telephone (TTY), call the Federal Relay Service (FRS), toll free, at 1-
800-877-8339.

SUPPLEMENTARY INFORMATION: Part F of title IV of the Higher Education 
Act of 1965, as amended (HEA), specifies the criteria, data elements, 
calculations, and tables the Department of Education (Department) uses 
in the Federal Need Analysis Methodology to determine the EFC.
    Section 478 of the HEA requires the Secretary to annually update 
the following four tables for price inflation--the Income Protection 
Allowance (IPA), the Adjusted Net Worth (NW) of a Business or Farm, the 
Education Savings and Asset Protection Allowance, and the Assessment 
Schedules and Rates. The updates are based, in general, upon increases 
in the Consumer Price Index (CPI).
    For AY 2022-23, the Secretary is charged with updating the IPA for 
parents of dependent students, adjusted NW of a business or farm, the 
education savings and asset protection allowance, and the assessment 
schedules and rates to account for inflation that took place between 
December 2020 and December 2021. However, because the Secretary must 
publish these tables before December 2021, the increases in the tables 
must be based on a percentage equal to the estimated percentage 
increase in the Consumer Price Index for All Urban Consumers (CPI-U) 
for 2021. The Secretary must also account for any under- or over-
estimation of inflation for the preceding year.
    In developing the table values for the 2021-22 AY, the Secretary 
assumed a 2.0 percent increase in the CPI-U for the period December 
2019 through December 2020. The actual inflation for this time period 
was 1.2 percent. The Secretary estimates that the increase in the CPI-U 
for the period December 2020 through December 2021 will be 1.8 percent.
    Additionally, section 601 of the College Cost Reduction and Access 
Act of 2007 (CCRAA, Pub. L. 110-84) amended sections 475 through 478 of 
the HEA affecting the IPA tables for the 2009-10 through 2012-13 AYs 
and required the Department to use a percentage of the estimated CPI to 
update the table in subsequent years. These changes to the IPA impact 
dependent students, as well as independent students with dependents 
other than a spouse and independent students without dependents other 
than a spouse. This notice includes the new 2022-23 AY values for the 
IPA tables, which reflect the CCRAA amendments. The updated tables are 
in sections 1 (Income Protection Allowance), 2 (Adjusted Net Worth of a 
Business or Farm), and 4 (Assessment Schedules and Rates) of this 
notice.
    Under section 478(d) of the HEA, the Secretary must also revise the 
education

[[Page 38068]]

savings and asset protection allowances for each AY. The Education 
Savings and Asset Protection Allowance table for AY 2021-22 has been 
updated in section 3 of this notice.
    Section 478(h) of the HEA also requires the Secretary to increase 
the amount specified for the employment expense allowance, adjusted for 
inflation. This calculation is based on increases in the Bureau of 
Labor Statistics' marginal costs budget for a two-worker family 
compared to a one-worker family. The items covered by this calculation 
are: Food away from home, apparel, transportation, and household 
furnishings and operations. The Employment Expense Allowance table for 
AY 2022-23 has been updated in section 5 of this notice.
    Section 478(g) of the HEA directs the Secretary to update the 
tables for State and other taxes after reviewing the Statistics of 
Income file data maintained by the Internal Revenue Service. After 
review of the 2018 Statistics of Income data file, the Secretary has 
determined that for AY 2022-2023 this table will not be updated. 
Changes to tax law in 2018 resulted in a cap of state, local, and other 
taxes that can be claimed as deductions on federal income tax returns. 
This led to a large drop in the share of filers claiming the deduction 
and thus the total amount of these taxes paid, causing the Statistics 
of Income data file to less accurately reflect state, local, and other 
taxes paid in 2018. While the 2018 Statistics of Income data file shows 
a substantial decline in state, local, and other taxes paid as share of 
income, more accurate data confirms that the year-over-year change in 
share of income put toward state and local taxes paid as a share of 
income grew from 9.80 percent to 9.89 percent. Therefore, the table in 
section 6 of this notice has not been updated and will remain the same 
as AY 2021-2022.
    The HEA requires the following annual updates:
    1. Income Protection Allowance. This allowance is the amount of 
living expenses associated with the maintenance of an individual or 
family that may be offset against the family's income. The allowance 
varies by family size. The IPA for dependent students is $7,040. The 
IPAs for parents of dependent students for AY 2022-23 are as follows:

                                          Parents of Dependent Students
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                                                                 Number in college
           Family size           -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2...............................         $19,630         $16,270  ..............  ..............  ..............
3...............................          24,440          21,100         $17,740  ..............  ..............
4...............................          30,190          26,830          23,490         $20,130  ..............
5...............................          35,620          32,260          28,920          25,560         $22,220
6...............................          41,670          38,310          34,970          31,610          28,270
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    For each additional family member add $4,700. For each additional 
college student subtract $3,340.
    The IPAs for independent students with dependents other than a 
spouse for AY 2022-23 are as follows:

                            Independent Students With Dependents Other Than a Spouse
----------------------------------------------------------------------------------------------------------------
                                                                 Number in college
           Family size           -------------------------------------------------------------------------------
                                         1               2               3               4               5
----------------------------------------------------------------------------------------------------------------
2...............................         $27,720         $22,980  ..............  ..............  ..............
3...............................          34,520          29,800         $25,060  ..............  ..............
4...............................          42,620          37,900          33,180         $28,430  ..............
5...............................          50,300          45,550          40,830          36,100         $31,380
6...............................          58,820          54,090          49,380          44,620          39,910
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    For each additional family member add $6,640. For each additional 
college student subtract $4,720.
    The IPAs for single independent students and independent students 
without dependents other than a spouse for AY 2022-23 are as follows:

        Independent Students Without Dependents Other Than Spouse
------------------------------------------------------------------------
                                                 Number in college
             Marital status              -------------------------------
                                                 1               2
------------------------------------------------------------------------
Single..................................         $10,950  ..............
Married.................................          17,550         $10,950
------------------------------------------------------------------------

    2. Adjusted Net Worth of a Business or Farm. A portion of the full 
NW (assets less debts) of a business or farm is excluded from the 
calculation of an EFC because (1) the income produced from these assets 
is already assessed in another part of the formula; and (2) the formula 
protects a portion of the value of the assets.
    The portion of these assets included in the contribution 
calculation is computed according to the following schedule. This 
schedule is used for parents of dependent students,

[[Page 38069]]

independent students without dependents other than a spouse, and 
independent students with dependents other than a spouse.

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     If the NW of a business or farm is                             Then the adjusted NW is
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Less than $1................................  $0.
$1 to $140,000..............................  $0 + 40% of NW.
$140,001 to $420,000........................  $56,000 + 50% of NW over $140,000.
$420,001 to $700,000........................  $196,500 + 60% of NW over $420,000.
$700,001 or more............................  $364,000 + 100% of NW over $700,000.
----------------------------------------------------------------------------------------------------------------

    3. Education Savings and Asset Protection Allowance. This allowance 
protects a portion of NW (assets less debts) from being considered 
available for postsecondary educational expenses. There are three asset 
protection allowance tables: One for parents of dependent students, one 
for independent students without dependents other than a spouse, and 
one for independent students with dependents other than a spouse.

 Parents of Dependent Students, and Independent Students With Dependents
 Other Than a Spouse, and Independent Students Without Dependents Other
                              Than a Spouse
------------------------------------------------------------------------
                                            And the older parent or the
If the age of the older parent is, or If      independent student is
  the age of the independent student is  -------------------------------
                                              Married         Single
------------------------------------------------------------------------
                                               Then the allowance is
                                         -------------------------------
25 or less..............................               0               0
26......................................             200               0
27......................................             400               0
28......................................             600               0
29......................................             800               0
30......................................           1,000               0
31......................................           1,200               0
32......................................           1,400               0
33......................................           1,700               0
34......................................           1,900               0
35......................................           2,100               0
36......................................           2,300               0
37......................................           2,500               0
38......................................           2,700               0
39......................................           2,900               0
40......................................           3,100               0
41......................................           3,200               0
42......................................           3,200               0
43......................................           3,300               0
44......................................           3,400               0
45......................................           3,500               0
46......................................           3,600               0
47......................................           3,700               0
48......................................           3,700               0
49......................................           3,800               0
50......................................           3,900               0
51......................................           4,000               0
52......................................           4,100               0
53......................................           4,200               0
54......................................           4,400               0
55......................................           4,500               0
56......................................           4,600               0
57......................................           4,700               0
58......................................           4,900               0
59......................................           5,000               0
60......................................           5,100               0
61......................................           5,300               0
62......................................           5,400               0
63......................................           5,600               0
64......................................           5,800               0
65 or older.............................           5,900               0
------------------------------------------------------------------------

    4. Assessment Schedules and Rates. Two schedules that are subject 
to updates--one for parents of dependent students and one for 
independent students with dependents other than a spouse--are used to 
determine the EFC from family financial resources that contribute to 
educational expenses. For dependent students, the EFC is derived

[[Page 38070]]

from an assessment of the parents' adjusted available income (AAI). For 
independent students with dependents other than a spouse, the EFC is 
derived from an assessment of the family's AAI. The AAI represents a 
measure of a family's financial strength, which considers both income 
and assets.
    The contribution of parents of dependent students, and independent 
students with dependents other than a spouse, is computed according to 
the following schedule:

----------------------------------------------------------------------------------------------------------------
                  If AAI is                                        Then the contribution is
----------------------------------------------------------------------------------------------------------------
Less than -$3,409...........................  -$750.
-$3,409 to $17,500..........................  22% of AAI.
$17,501 to $22,000..........................  $3,850 + 25% of AAI over $17,500.
$22,001 to $26,500..........................  $4,975 + 29% of AAI over $22,000.
$26,501 to $31,000..........................  $6,280 + 34% of AAI over $26,500.
$30,001 to $35,500..........................  $7,810 + 40% of AAI over $31,000.
$35,501 or more.............................  $9,610 + 47% of AAI over $35,500.
----------------------------------------------------------------------------------------------------------------

    5. Employment Expense Allowance. This allowance for employment-
related expenses--which is used for the parents of dependent students 
and for married independent students--recognizes additional expenses 
incurred by working spouses and single-parent households. The allowance 
is based on the marginal differences in costs for a two-worker family 
compared to a one-worker family. The items covered by these additional 
expenses are: Food away from home, apparel, transportation, and 
household furnishings and operations.
    The employment expense allowance for parents of dependent students, 
married independent students without dependents other than a spouse, 
and independent students with dependents other than a spouse is the 
lesser of $4,000 or 35 percent of earned income.
    6. Allowance for State and Other Taxes. The allowance for State and 
other taxes protects a portion of parents' and students' incomes from 
being considered available for postsecondary educational expenses. 
There are four categories for State and other taxes, one each for 
parents of dependent students, independent students with dependents 
other than a spouse, dependent students, and independent students 
without dependents other than a spouse.

               Percent of Income Paid in State Taxes by State, Dependency Status, and Income Level
----------------------------------------------------------------------------------------------------------------
                                                                   Parents of dependent students     Dependent
                                                                   and independent students with   students and
                                                                  dependents other than a spouse    independent
                                                                 --------------------------------    students
                                                                                                      without
                              State                                                                 dependents
                                                                   Income under   Income $15,000   other than a
                                                                      $15,000          & up           spouse
                                                                                                 ---------------
                                                                                                    All income
----------------------------------------------------------------------------------------------------------------
Alabama.........................................................               3               2               2
Alaska..........................................................               2               1               0
Arizona.........................................................               4               3               2
Arkansas........................................................               4               3               3
California......................................................               9               8               6
Colorado........................................................               4               3               3
Connecticut.....................................................               9               8               5
Delaware........................................................               5               4               3
District of Columbia............................................               7               6               6
Florida.........................................................               3               2               1
Georgia.........................................................               5               4               4
Hawaii..........................................................               5               4               4
Idaho...........................................................               5               4               4
Illinois........................................................               6               5               3
Indiana.........................................................               4               3               3
Iowa............................................................               5               4               3
Kansas..........................................................               4               3               3
Kentucky........................................................               5               4               4
Louisana........................................................               3               2               2
Maine...........................................................               6               5               3
Maryland........................................................               8               7               6
Massachussets...................................................               7               6               4
Michigan........................................................               5               4               3
Minnesota.......................................................               7               6               5
Mississippi.....................................................               3               2               2
Missouri........................................................               5               4               3
Montana.........................................................               5               4               3
Nebraska........................................................               5               4               3
Nevada..........................................................               3               2               1
New Hampshire...................................................               4               3               1
New Jersey......................................................               9               8               5
New Mexico......................................................               3               2               2

[[Page 38071]]

 
New York........................................................              10               9               7
North Carolina..................................................               5               4               3
North Dakota....................................................               2               1               1
Ohio............................................................               5               4               3
Oklahoma........................................................               3               2               2
Oregon..........................................................               7               6               5
Pennsylvania....................................................               5               4               3
Rhode Island....................................................               6               5               4
South Carolina..................................................               4               3               3
South Dakota....................................................               2               1               1
Tennessee.......................................................               2               1               1
Texas...........................................................               3               2               1
Utah............................................................               5               4               4
Vermont.........................................................               6               5               3
Virginia........................................................               6               5               4
Washington......................................................               3               2               1
West Virginia...................................................               3               2               3
Wisconsin.......................................................               6               5               4
Wyoming.........................................................               2               1               1
Other...........................................................               2               1               1
----------------------------------------------------------------------------------------------------------------

    Accessible Format: On request to the program contact person listed 
under FOR FURTHER INFORMATION CONTACT, individuals with disabilities 
can obtain this document in an accessible format. The Department will 
provide the requestor with an accessible format that may include Rich 
Text Format (RTF) or text format (txt), a thumb drive, an MP3 file, 
Braille, large print, audiotape, or compact disc, or other accessible 
format.
    Electronic Access to This Document: The official version of this 
document is the document published in the Federal Register. You may 
access the official edition of the Federal Register and the Code of 
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document, as well as all other documents of the Department published in 
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site.
    You may also access documents of the Department published in the 
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www.federalregister.gov. Specifically, through the advanced search 
feature at this site, you can limit your search to documents published 
by the Department.
    Program Authority: 20 U.S.C. 1087rr.

Richard Cordray,
Chief Operating Officer, Federal Student Aid.
[FR Doc. 2021-15217 Filed 7-16-21; 8:45 am]
BILLING CODE 4000-01-P